HSBC extends slide on capital, Asia growth worries

LONDON (Reuters) - HSBC Holdings (HSBA.L) (0005.HK) shares fell over 5 percent on Thursday to extend a 6-day retreat to 16 percent as concern mounted it could raise capital or cut its dividend to keep its balance sheet advantage.

Growing worries about a slowdown in Asian economies and the weak U.S. dollar were other negatives, dealers and analysts said.

By 1035 GMT HSBC shares were down 5.7 percent at 633.5 pence, underperforming a 1.7 percent decline by the broader European bank sector. The shares closed at 762.5p on Dec. 10 and have fallen each day since.

The slide gathered pace on Tuesday after analysts at CLSA in Asia said HSBC could raise $14 billion to boost its capital ratios, and other analysts have said while HSBC doesn't need to raise capital, it could opt to do so to retain its advantage over rivals.

HSBC's tier 1 capital was 8.9 percent at the end of September -- which puts it above most European peers but below the Hong Kong bank average -- but its high cash generation has reduced pressure on it to raise capital.

But the bar has been raised, with many European peers beefing up their capital to prepare for a recession. Standard Chartered (STAN.L) completed a $2.7 billion rights issue on Thursday.

"The risk is that HSBC prevaricates and ultimately raises capital at a lower price and is therefore more dilutive to earnings," analysts at Cazenove said in a note on Thursday.

Another option could be for the bank to cut its dividend by half, which would save a cumulative 91 basis points of capital between 2009 and 2011, Cazenove said.

HSBC faces more hefty bad debts in its U.S. consumer banking arm through into next year, while impairments in Europe are also rising and will absorb capital.

The bank has said in the past it is comfortable with its capital position and regards itself as one of the best capitalised and liquid banks in the world.

(Reporting by Steve Slater; Editing by Victoria Bryan)